Tanzania opens its doors to foreign investment

Although best known for such scenic wonders as Lake Victoria, Mt. Kilimanjaro and the Serengeti plain, Tanzania is also rich in mineral resources such as gold, diamonds and nickel.

Those resources have remained largely undeveloped because since independence was achieved in 1961, economic policies oriented toward state ownership of industries scared off both foreign investment and local capital. After adopting reforms to open the economy and establish an investment climate hospitable to private enterprise, the East African nation is now attempting to attract foreign investors in various key sectors, including mining.

Jakaya Kikwete, Tanzania’s minister for water, energy and minerals, recently visited both Toronto and Vancouver as part of an international investment promotion tour to bring the mining industry up-to-date on the recent changes in his country.

“We seek investors who will create jobs for our people, bring technologies to our shores and who will deploy capital in ways that contribute to our economic growth while clearly setting a base for their own substantial profit growth,” the minister says. “Investors of this kind will find that Tanzania is indeed open for business.”

The reforms include guaranteed access to foreign exchange for repatriation of profits, accelerated and simplified handling of investment proposals, and favorable tax and regulatory treatment for mining investors. Legislation gives the Tanzanian government a 7.5% minimum stake in foreign companies setting up in the country, and an option to buy up to a maximum of 32%. The policies may still need some fine-tuning, Kikwete admits, noting that Placer Dome, the first major to knock on the door, was not able to secure an agreement on gold projects it was interested in at the time. Overall, Kikwete says he is “pleased” by the response, and has already signed a major diamond exploration and mining agreement with De Beers covering more than 22,000 square km.

“Diamonds are what interests De Beers most in our country and with good reason,” the minister adds. “We believe, for example, that there may well be more than 300 undeveloped kimberlite pipes in our country.”

Tanzania (formerly Tanganyika) used to be a major supplier of diamonds, primarily from the Williamson mine at Mwadui, which was discovered in 1940 by Canadian geologist, John Williamson, and his Tanganyikan assistant, Bundallah. The mine went on to produce in excess of 17 million carats of diamonds, about half of gem quality, with a gross value of more than $1 billion.

But the minister also says Tanzania has “tremendous potential” for gold deposits, a metal that shared the spotlight with diamonds as the country’s principal mineral product since the early 1990s. Almost all current production is from individual prospectors or artisanal miners working with hand tools in the fashion of Brazil’s “garimpeiros.”

Of specific interest to Canadians, Kikwete says, is an Archean shield environment with a number of classic Canadian-type greenstone gold lode deposits (that is, Timmins, Kirkland Lake camps), many capped by tropically enriched weathered enrichment zones. The association of some gold lodes with banded iron formation units is also typical.

The country has some potential for epithermal gold deposits in younger rocks, and potential within an extensive Proterozoic terrane containing lode and near-surface deposits of types now attracting interest in South America, West Africa and elsewhere.

These under-explored and underdeveloped geological terranes cover more than 800,000 square km, and besides gold and diamonds, offer opportunities for large nickel deposits, as well as coal, iron, tin, kaolin, graphite, precious gems and other minerals.

Kikwete expects he will soon be signing an agreement with a unit of Sutton Resources (VSE) that will allow for full-scale exploration and development of “what may well be the largest still undeveloped nickel and cobalt belt in the world,” he says.

Sutton is seeking to develop the Kabanga nickel deposit located west of Lake Victoria, where recent drilling is expanding reserves last reported at 36 million tonnes averaging 1.05% nickel, 0.11% cobalt and 0.21% copper. Companies interested in Tanzania’s mineral opportunities will find a substantial geologic and mineral data base in the country’s Geological Survey which was established by the colonial British government 60 years ago (although there are gaps in the work).

On the political front, Kikwete points out that Tanzania recently decided to replace its single-party system through constitutional changes leading to a multi-party democratic system. The change is expected to be peaceful because no single ethno-linguistic group makes up more than 20% of the population. “We do not indulge in civil wars, our leaders are not known around the globe as being corrupt, and our society is indeed a peaceful and stable one,” Kikwete says.

But Kikwete admits that his country faces a challenge to rebuild and diversify its fragile economy which is almost solely based on agricultural commodities. The country is one of the poorest in the world — per capita income is US$108 — and much of the infrastructure such as roads and trains is in need of repair or modernization. Many of the mineralized districts are distant from paved roads, ports and other infrastructure, and there is lack of access to modern equipment and technology.

But improvements are expected within the next several years; the World Bank recently agreed to a loan package worth more than US$1-billion to address shortcomings in the country’s infrastructure.